Raju - Satyamcomp

When Byyraju Ramalinga Raju ran the letters of his company Satyam backwards to create the seemingly innocuous Maytas a decade ago, little did he imagine that one day it would threaten to reverse his credibility itself.


Indeed, his flip-flop last week as he tried and then aborted, in less than 12 hours, a move to buy out his group companies Maytas Infrastructure and Maytas Properties for $1.6 billion to make it part of the flagship Satyam Computer Services has proved to be an embarrassment beyond repair.

Even as the corporate world wonders about the fail-safe theory of independent boards, the question that dogs investors is what triggered the transformation in Dr Jekyll.

The saga symbolises the cliché that everything that can go wrong will go wrong.
Consider the facts: the Raju family which owns barely 8.68 per cent of Satyam Computer Services—India’s fourth largest software company— put up a proposal for the acquisition of two companies Maytas Properties and Maytas Infrastructure.

The theory was that in a cyclical downturn, diversification would bring income and stabilisation to the software outfit. Both companies are owned by the Raju family—his sons, Teja and Rama, are vice-chairmen.

The price: $1.6 billion. It is an enduring mystery as to how the valuation was arrived at and if any other similar businesses were considered for acquisition.

The board, which consists of individuals like Krishna Palepu and former cabinet secretary T.R. Prasad, was chaired by independent director Mendu Rammohan Rao (dean of the Indian School of Business) and dealt with issues on unrelated diversification and valuation. It did not insist on shareholder consent as they were told it was not required by law.

In the corporate version of Believe it or Not, the board passed the proposal. It was only when investors voted with their feet, selling the stock, and the ADR listed on NYSE lost 52 per cent that a panicky Raju did the U-turn.

Interestingly, the proposal was reversed by e-mail and the man who chaired the meeting was the last to know.

In that 12 hours, Satyam shareholders saw Rs 4,333 crore wiped out. Raju, who believed in “delighting the stakeholder”, had triggered a revolt and even his offer of buyback and assurances have failed to restore market confidence. Indeed, the total market capitalisation of the company is down to Rs 10,930 crore (from Rs 15,263.11 crore before the fiasco).